Zhao played a key role in bringing cryptocurrencies into the mainstream. He built Binance into a juggernaut that at one point controlled almost two-thirds of spot trading over centralised exchanges – attracting scrutiny from regulators and law enforcement agencies around the world along the way.
The departure of crypto’s perhaps most iconic remaining executive comes as the industry tries to put its reputation for scandals, scams and other illicit activities behind it. Several entrepreneurs associated with that era, from Bankman-Fried to Do Kwon and Alex Mashinsky, are either in jail or have been charged with alleged crimes that led to multibillion-dollar losses.
Zhao faces as many as 10 years in prison but is expected to get no more than 18 months under a plea deal that appears to have saved him from the harsh penalties that other prominent crypto criminals have faced. The Justice Department hasn’t decided yet what length of a prison term they will seek for him.
“I will have to deal with some pain, but will survive,” Zhao said in an internal announcement. “I needed a break anyway.” He also provided a glimpse of what’s in store for Binance: “We will get through, although with some changes in structure.”
Born in China, Zhao moved to Vancouver when he was 12 and became a Canadian citizen. With a computer science degree from McGill University, he began a career building trading systems, including a stint at Bloomberg LP, the parent company of Bloomberg News.
In 2013, Zhao was running his own software company in Shanghai when he discovered Bitcoin over a poker game. After working at crypto firms Blockchain.info and OKCoin, he started Binance in 2017 together with chief marketing officer Yi He, with whom he has children.
Binance quickly embarked on an acquisition spree that saw it morph into a brokerage, digital wallet, venture fund, custody service, data provider, digital-art marketplace and token issuer – all under Zhao’s direct control.
Within just a few years, Zhao was the richest person in crypto. Favouring a buzz cut and black polo shirts featuring Binance’s logo, he became a fixture on the crypto conference circuit, spending 580 hours on airplanes in 2022 by his own estimate.
The lack of separation between business actives such as custodial and trading services common among crypto exchanges, unlike in traditional finance – has stirred concerns that giant crypto exchanges like Binance could pose systemic risks.
When Bankman-Fried’s FTX imploded in November 2022, billions of dollars of client funds were trapped because FTX had lent assets to the hedge fund he also controlled, Alameda Research, which had made huge losing bets. Zhao himself helped hasten FTX’s demise with a post on Twitter about selling Binance’s holding of its native token FTT, which touched off a stampede to withdraw money from FTX.
“I will have to deal with some pain, but will survive. I needed a break anyway.”
Former Binance chief Changpeng Zhao
Bankman-Fried was convicted of a massive fraud in early November and is awaiting sentencing. He faces the possibility of decades in prison.
Binance and other exchanges have argued that they present no similar risks because all of their client assets are kept separated and thus available for withdrawal at any time. Zhao himself regularly uses the term “SAFU” in tweets to assure customers that their funds are safe.
In the third quarter, the exchange has accounted for about 38 per cent of all trading volumes across the spot market, down from nearly 55 per cent in the first quarter of the year, according to researcher CCData. By comparison, Coinbase, the biggest US crypto exchange, had a 5.7 per cent market share in the quarter.
While Zhao publicly displayed defiance amid the charges, Binance authorities were working with regulators behind the scenes. Even Zhao’s official statement back in March was a bit more conciliatory than his “4” tweet, saying the firm was looking for “amicable solutions.”
The 4 tweet quickly became a favourite of his on-line detractors Tuesday. It actually represented, they snickered, the $US4 billion fine Binance would pay.
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